Fed Ends Zero-Rate Era • Hacker News Board

Re: Fed Ends Zero-Rate Era

#141

Post by clarkmoody » Wed, Dec 16, 2015, 9:34 PM UTC

jbooth wrote: post #105

zeveb wrote: post #102

Earlier quoted context omitted.

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

It's not about 'wisely' in terms of returns to the individual who invested, it's about 'wisely' in terms of creating aggregate demand. For example, funding a bunch of national infrastructure projects would have horrible returns, being a 100% loss to the person who spent the money. But that money circulates in the economy, creating demand, and we get the infrastructure afterwards as well. That's speculation, of course…

Many smart people argue that the New Deal prolonged the Great Depression due to the government's incessant meddling in the market with price controls and new regulations.

Re: Fed Ends Zero-Rate Era

#142

Post by [deleted] » Wed, Dec 16, 2015, 9:36 PM UTC

dragonwriter wrote: post #89

toomuchtodo wrote: post #51

Earlier quoted context omitted.

Exactly correct. The Federal Reserve has the knobs and levers to create asset bubbles, but not to stoke consumer demand. Only Congress can do that with legislation increasing the minimum wage, changing corporate taxes so it behooves companies to pay employees more, or legislation increasing entitlements such as social security. Those in lower and middle classes are the ones who govern the velocity of money through th…

> changing corporate taxes so it behooves companies to pay employees more "Corporate" is perhaps too restrictive, but shifting the relative tax burden from labor to capital, without changing the overall share of the economy represented by taxes or government spending, would probably be pretty powerful here. There are, to say the least, political difficulties involved.

[deleted]

Re: Fed Ends Zero-Rate Era

#143

Post by cpeterso » Wed, Dec 16, 2015, 9:39 PM UTC

jbooth wrote: post #105

zeveb wrote: post #102

Earlier quoted context omitted.

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

It's not about 'wisely' in terms of returns to the individual who invested, it's about 'wisely' in terms of creating aggregate demand. For example, funding a bunch of national infrastructure projects would have horrible returns, being a 100% loss to the person who spent the money. But that money circulates in the economy, creating demand, and we get the infrastructure afterwards as well. That's speculation, of course…

> we can look back to the New Deal to see that it's worked at least once before

If only more legislation was evidence-based..

Re: Fed Ends Zero-Rate Era

#144

Post by mikekchar » Wed, Dec 16, 2015, 9:43 PM UTC

vezzy-fnord wrote: post #86

toomuchtodo wrote: post #80

Earlier quoted context omitted.

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. Japan's been running structural deficits for decades, and still has a very high quality of life. > but in reality politics and the economy don't exist in frictionless vacuums and there are political costs to pork barreling, logrolling, unsound investments and so forth. As basic minimum income solves this…

I argue my ideas only need to hold water for another 10-30 years, depending on if technology advancement keeps up. Given that the AI community's prediction making skills have been just slightly better than those of Nostradamus, that's a very tough gambit to rely on. Japan's been running structural deficits for decades, and still has a very high quality of life. Except for the aftermath of the whole Lost Decade thing…

As someone who has lived in Japan for 6 of the last 8 years (with 2 in the UK in the middle) -- I'll take Japan any day. Especially when I compare what's happening in real estate in Japan vs what's happening in the UK, I've got a pretty good feeling that one of the two has got it right (hint: not the UK).

However, not sure if Japan will survive "Abenomics" (just as sensible as Reaganomics, but with a dash added corruption ;-) ).

Re: Fed Ends Zero-Rate Era

#145

Post by Frondo » Wed, Dec 16, 2015, 9:43 PM UTC

jpadkins wrote: post #140

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner. How do you get 535 people (congress) to spend $3 trillion smarter? It's an impossible task. A fools errand. Even if we elected the 500 smartest people to congress, the results wouldn't be much better. We need less of the economy flowing thru the federal government, not more.

Nah, it's actually pretty easy. The 535 people just need to assign general priorities, like spend a third our country's money on health care and education, a third of it on infrastructure, a little bit on funding pure research, and whatever's left over, the military can have.

They're not in charge of deciding how each individual dollar is spent, and they shouldn't be.

Re: Fed Ends Zero-Rate Era

#146

Post by brc » Wed, Dec 16, 2015, 9:44 PM UTC

redler wrote: post #135

brc wrote: post #114

Earlier quoted context omitted.

Consumer demand is meaningless. Trying to push it is like trying to push a string. Demand is an artefact of production. Unless your economy is producing, you won't increase quality of life and wealth for all citizens. This point is obvious, but gets completely lost in all the frenzy around 'stimulating demand'. To buy something, first you have to produce something worthy of exchange. Everyone has to start from this p…

Supply and demand are entwined in a perpetual dance, and "if you build it they will come" only goes so far. A product has to find a market capable of making the purchase. Opening a Whole Foods supermarket in rural Tanzania isn't going to boost sales of Tom's of Maine Wicked Cool Toothpaste -- a product apparently worthy of exchange among sufficiently wealthy consumers in a different context.

Malinvestment in incorrect production is part of the process. The person who produces unwanted goods and services must gain the feedback that they have, so they can switch production to what is desired. This is a very important reason why crony capitalism, protectionism and secession regulation hurts everyone.

I have never stated that 'if you build it they will come', because that is patently false. This is a common straw man erected by the true 'aggregate demand is all' believer (I don't know if this is your position or not). If you build it, they will come is as absurd as 'if we just gave everyone a bit more money, the economy would grow'.

Re: Fed Ends Zero-Rate Era

#147

Post by [deleted] » Wed, Dec 16, 2015, 9:44 PM UTC

jpadkins wrote: post #140

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner. How do you get 535 people (congress) to spend $3 trillion smarter? It's an impossible task. A fools errand. Even if we elected the 500 smartest people to congress, the results wouldn't be much better. We need less of the economy flowing thru the federal government, not more.

[deleted]

Re: Fed Ends Zero-Rate Era

#148

Post by jdc » Wed, Dec 16, 2015, 9:45 PM UTC

jpadkins wrote: post #140

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner. How do you get 535 people (congress) to spend $3 trillion smarter? It's an impossible task. A fools errand. Even if we elected the 500 smartest people to congress, the results wouldn't be much better. We need less of the economy flowing thru the federal government, not more.

The 500 smartest people? They simply delegate and entrust a small committee of the five most qualified people with the resources they need to get the job done.

Re: Fed Ends Zero-Rate Era

#149

Post by jellicle » Wed, Dec 16, 2015, 9:47 PM UTC

zeveb wrote: post #102

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

There are a vast number of situations where the individual decisions about how to spend money/take action may be the best for the individual, but bad for the society overall. For each and every one of those, it's better for society to act as a unit to make the optimal decision.

https://en.wikipedia.org/wiki/Tragedy_of_the_commons

Re: Fed Ends Zero-Rate Era

#150

Post by cpeterso » Wed, Dec 16, 2015, 9:48 PM UTC

vecter wrote: post #130

enahs-sf wrote: post #127

Does this mean that buying a home in San Francisco, where 1/4 of the homes sold are all cash, just got a little bit more difficult?

Most of those cash buyers are wealthy Chinese people living in China. I doubt this will change that.

I read that more cash buyers are American retirees than wealthy people living in China.